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November 8, 2011

Krawcheck at SIFMA: Wall St. Must Shift Its ‘Culture of Crisis’

The wealth-management business also needs to do more to attract younger investors, as well as female advisors and managers

Former Bank of America (BAC) wealth-management head Sallie Krawcheck said Monday that Wall Street is running the business through a “culture of crisis,” which must change so that it can attract new clients.

“Participants are basically making quick decisions in reaction to today’s news as opposed to looking at the long-term implications of those decisions,” Krawcheck said at the meeting, as reported by CNBC. (Krawcheck was let go by BofA-Merrill in early September as part of a reorganization effort.)

In addition, Krawcheck said that too many of the markets have drifted from their original purpose. “Somehow we got to where they're betting mechanisms. Not in every instance, everywhere,” she explained. “But we're talking about them being tools for people to make money as opposed to the efficient allocation of capital.”

Wealth Management

Krawcheck, who led BofA’s wealth-management unit for roughly two years, described the need for the business to come to grips with the fact that younger potential clients “no longer trust banks or the markets to create the wealth they're looking for,” CNBC reported.

She also shared the thoughts of one of her former clients, who said that they didn’t have enough confidence in the markets and tax policy in the recent past to take out any loans, and “a good bit of it was, “I just don't know what the growth is going to be there to get me a return on any money that you're going to lend me.”

"We talk about stock market returns. We're not talking as an industry about protecting the downside," Krawcheck explained, and about planning and asset allocation.

"The number one thing is 'Return my phone call,'" the veteran executive said. "Clients typically say investment performance is important, but it's usually about 8th on the list."

Women & Wall Street

The industry "doesn't do a great job for women or being appropriate" for the next generation of investors, said Krawcheck, according to a Reuters report.

Women account for about 15 percent or slightly more of financial advisors. They represent about this level or somewhat lower in terms of senior-management positions. "We do have large groups of people -- women -- who are underserved by our business."

A more diverse advisor and managerial population could help the wealth-management industry attract clients and boost overall results given the challenges of a complex economy, Krawcheck shared: "You need a broad range of perspectives in order to navigate through."

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